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What is the importance of a good credit score? Here are steps to monitor credit score online
18 October, 2024 | 11:00 IST
A credit score is a 3-digit number that reflects your creditworthiness, representing your credit history and financial behaviour. Whether you have personal loans, credit cards or mortgages, this score can significantly influence your ability to secure financing in the future. In India, credit score ranges from 300 to 900, with higher scores indicating a lower risk to lenders.
Before diving into how to monitor your credit score, it’s important to understand why it matters. Lenders evaluate your credit score to determine your creditworthiness before approving loans or credit card applications. A high score (generally considered to be above 750) indicates that you are a reliable borrower, while a low score may lead to rejection or higher interest rates. Monitoring your credit score regularly is crucial for financial health and can easily be done through the Moneycontrol app and website.
Use a credit score checker: To effectively keep track of your credit score, you need a reliable credit score checker. Users can check their credit score instantly for free on the Moneycontrol app, which offers comprehensive features to help you monitor your credit health.
Regularly review your credit score report: Your credit score report is a detailed document that outlines your credit history, including your payment behaviour, outstanding debts and inquiries made by lenders. Regularly reviewing your credit score report can help you understand the factors influencing your score. This awareness allows you to take proactive steps to improve your score if necessary.
Set up alerts for changes: Many financial services offer alert systems that notify you of significant changes to your credit score. This feature can help you react promptly to any drops in your score, whether due to missed payments or increased debt. Monitoring these alerts can be crucial in maintaining a healthy credit score.
Understanding the credit score range is vital for knowing where you stand. Here's a breakdown:
Less than 300: Indicates no score or no history, meaning you have no credit history. Start building your score to access better offers.
300-550: This range signifies a very low credit score and indicates that your credit history is damaged. Check your report and take corrective actions.
551-620: This is also a low credit score and does not display good credit behaviour, so immediate improvement is necessary.
621-700: This range indicates a fair credit score, meaning you’re close to a strong score. Work on it for better offers.
701-759: This is a good credit score, indicating responsible credit usage. Most lenders will consider your applications positively.
760+: This is an excellent credit score, showing that your track record is superb. You’re likely to receive the best offers from lenders.
Understanding the credit score range is vital for knowing your credit worthiness. Above classification is based on the credit score ranges of CIBIL. However, these credit score categories may differ depending on the credit rating agency.
How credit scores are calculated
Numerous factors affect your credit score:
Loan repayment history: Timely repayments significantly boost your credit score, while defaults or late payments negatively impact it.
Duration of credit history: A longer credit history can indicate reliability, positively influencing your score.
Number of hard inquiries: Each application for credit results in a hard inquiry, which can affect your score. Frequent inquiries may signal to lenders that you're credit-hungry.
Credit utilisation: This is the ratio of your current credit utilisation to your total available credit. It’s best to keep your usage below 30%.
Credit mix: A diverse mix of credit types, such as credit cards, home loan, auto loan, etc., can positively influence your score, indicating your ability to manage different types of credit responsibly.
Impact of your credit score on debt eligibility
Your credit score plays a major role in determining your credit eligibility. Lenders generally prefer applicants with a credit score of 750 and above. However, a poor credit score may not just lead to application rejections, it can also result in higher interest rates, making loans costlier. Therefore, improving your score should be a priority if it falls below the desired threshold.
Credit bureaus in India
In India, credit scores are calculated by credit bureaus such as TransUnion CIBIL, Experian, CRIF High Mark and Equifax. Each bureau operates independently and may have different scoring models, which can result in some variations in your credit score across platforms.
Conclusion
To sum up, monitoring your credit score is essential for maintaining financial health. With tools like the Moneycontrol app, checking your score and receiving detailed reports is hassle-free and efficient. Regularly reviewing your score and taking proactive steps to maintain or improve it can ensure you remain in good standing with lenders.
Don’t forget, a strong credit score not only aids in loan and credit card approvals but also helps you secure lower interest rates and better credit terms.
By utilising the available resources and keeping an eye on your credit score, you can take control of your financial future and make informed decisions that benefit your financial well-being. Start today with the Moneycontrol app and ensure you are on the right track to a healthy credit score!
Summary
A good credit score opens doors to better loans and credit card opportunities. Keeping track of your credit score is important to maintain and improve credit score. Use trustworthy online tools to keep track of your score and download credit reports.
Disclaimer
This piece/article was written by an external partner and does not reflect the work of Moneycontrol's editorial team. It may include references to products and services offered by Moneycontrol.
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